Potential GDP is:
A) minimum amount of output that can be produced given the labor force, capital stock, and technology.
B) maximum amount of output that can be produced given the labor force, capital stock, and technology.
C) varies over the business cycle.
D) none of the above.
B
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Suppose there are only two goods, apples and oranges. What happens if the price of each good increases by 15 percent?
a. The consumer will substitute apples for oranges. b. The consumer will substitute oranges for apples. c. There is no substitution effect because relative prices have remained constant. d. Demand for both goods increases. e. Demand for both goods decreases.
If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35, what is the firm's average fixed cost at that level of output?
A) $65 B) $50 C) $15 D) It is impossible to determine without additional information.